Reserve Bank of India Governor Sanjay Malhotra calls for increased investment in AI technology, infrastructure, and staff training among Indian banks, warning of risks and the importance of strategic deployment in the evolving financial landscape.
Indian banks need to move faster on artificial intelligence by putting more money into technology, infrastructure and staff training, Reserve Bank of India Governor Sanjay Malhotra said on Tuesday, while warning that the rush to automate also brings serious risks. Speaking at an industry event in Mumbai, Malhotra said lenders must understand exactly what they are deploying if they want to succeed in the AI era. He said the biggest winners will not simply be the quickest adopters, but those that use the tools with proper judgement and oversight.
Malhotra cautioned that broader use of AI could lead to biased or unclear decisions, while creating fresh exposure to data privacy breaches and cyberattacks. He also warned that banks could become vulnerable if they rely too heavily on a narrow group of models or outside technology vendors. That concern echoes wider global anxieties over concentration risk in financial services, with JPMorgan analysts earlier this year suggesting that smaller US banks may struggle to keep pace with the investment required for AI and could face pressure to merge. Bloomberg also reported in February that European banks told the European Central Bank they expected to benefit from AI while managing the associated risks.
His comments come as policymakers worldwide weigh how to encourage innovation without weakening the resilience of the banking system. Bloomberg Intelligence reported in April that European banks expect AI-related investment to lift headcount by 4% over the next three years, largely because lenders will need engineers and data scientists to build and maintain these systems. In contrast, some officials see the technology as a competitive necessity rather than a cost-saving tool alone. Former UK prime minister Rishi Sunak, now a senior adviser to Goldman Sachs, has urged smaller firms to adopt AI or risk falling behind.
Malhotra also pointed to geopolitical and trade uncertainty as additional headwinds for India’s financial sector, but said banks remain well positioned because of strong credit growth, low bad loans, ample liquidity and healthy profitability. He said India’s economy should emerge stronger from current challenges, citing steady growth, contained inflation and large foreign-exchange reserves. The RBI governor’s remarks follow earlier warnings from Finance Minister Nirmala Sitharaman, who in April said banks faced unprecedented AI-related risks and should take pre-emptive steps to protect IT systems, customer data and funds.
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